2025 (7) TMI 1222

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....-12- 2018. The sole grievance of the assessee is deletion of addition of Rs. 285.54 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. The assessee being a resident-firm is stated to be engaged in manufacturing and export of tractor parts, fasteners and other engineering goods. 2. Pursuant to survey action on the assessee on 09-10-2015, the case was reopened by issuance of statutory notices. The main discrepancy arose on account of valuation of stock. During survey, statements of operations manager Shri Kanwaljeet Singh Rekhi, Shri Sunil Kapoor (Partner) and Shri Rakesh Kapoor (Partner) was recorded wherein they could not explain the process of valuation of stock and everyone told a ....

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.... No.1(a),(b),(c). Undeniably the power to reject books of accounts is to be exercised only when the books are found incorrect or incomplete for determining the true and correct profits earned by the assessee. This power is implied in the Income Tax Officers power to inquire into the total income of the assessee. 10. In the present case, undisputedly the only basis for rejecting the books of accounts is non maintenance of stock register and the incorrect method of valuation of stock adopted by the assessee. No other defect has been pointed out by the Revenue authorities for rejecting the books of accounts. As for the non maintenance of stock register the assessee has explained the non feasibility of maintaining it considering the fact that....

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....on maintenance of stock register has been a hindrance in determining the true and correct profits earned by the assessee and also what was the infirmity in the method adopted by the assessee of physically verifying its stock at the end of the year. Therefore in our opinion the mere fact of non maintenance of stock register cannot be the basis for rejection of books of accounts. 12. The only other defect which has been pointed out is the method of valuation adopted for determining the value of the stock. Admittedly the assessee has been applying the Gross Profit Rate of the year to the stock for determining the value. We agree with the Revenue that this is not a correct method of valuation of stock which ideally should be valued at cost of....

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.... the assessee is therefore allowed. 15. Ground No.2(a),(b),(c) relates to the application of estimated Gross Profit Rate. Since we have set aside the rejection of the books of accounts, there arises no occasion for the estimation of GPR. The grounds raised by the assessee are therefore infructuous. 16. In effect the appeal of the assessee is allowed. The Tribunal, on identical facts, held that the books could not be rejected u/s 145(3). Finally, Ld. AO was directed to determine value of stock after applying correct method of valuation. The Ld. AR has placed on record the consequential order of Ld. AO passed on 21-03- 2022 wherein Ld. AO has accepted the valuation of stock as done by the assessee and chose not to make any addition to the....